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The Economic Effects of Business to Business Internet Activity

Published online by Cambridge University Press:  26 March 2020

Martin Brookes  and
Zaki Wahhaj
Martin Brookes
Affiliation:
Goldman Sachs International Peterborough Court, 133 Fleet Street, London EC4A 2BB
Zaki Wahhaj
Affiliation:
Goldman Sachs International Peterborough Court, 133 Fleet Street, London EC4A 2BB
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Abstract

This article argues that an effective way to analyse the macroeconomic effects of business-to-business electronic commerce is to regard it as a decline in the cost of information to producers. Calculations based on input-output tables and the IMF's Multimod macroeconomic model show that current estimates of such savings translate into about a 5 per cent long-run increase in output in the major industrialised economies. In the medium term, although the deflationary effects of the shock would provide greater room to central banks to keep interest rates low, the simulation results also hint at short-term inflation risks if current demand outstrips supply in anticipation of higher future incomes.

Type
Research Article
Information
National Institute Economic Review , Volume 175 , January 2001 , pp. 95 - 108
Copyright
Copyright © 2001 National Institute of Economic and Social Research

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Footnotes

∗

The authors are grateful to several colleagues for help in preparing this article, most particularly Gavyn Davies, Guy Lamming, Peter Sullivan, Mike Young, Ben Broadbent, Thomas Mayer, David Walton, Tom Berquist and Jamie Friedman.

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